It was indeed an exciting 2018 fiscal year. It was challenging for the Gross Domestic Product (GDP) as it was rewarding for federal pensioners whose entitlements were paid. After emerging from a recession, in 2017 Nigeria’s economy began to look up. GDP growth peaked at 2.11 percent in Q4 2017.
But problems began to set in before the party was over. No thanks to yet again, loss in international oil prices and burgeoning insecurity across the country which threatened food security and fresh investments. Also, investment conditions in western economies, especially the United States trade normalization policy, began to see foreign portfolio investments leave Nigeria back to the United States and elsewhere where yields were rising. At least $6bn left Nigeria’s shores based on statistics from the Central Bank of Nigeria. GDP growth plunged from 2.11 percent in Q4 2017 to 1.95 percent in Q1 2018 and further down to 1.5 percent in Q2 2018.
Reading the communiqué to newsmen after the MPC meeting of September 2018, CBN Governor Godwin Emefiele said “the committee was concerned that the exit from recession may be under threat as the economy slowed to 1.95 and 1.50 per cent in Q1 and Q2 2018, respectively.”
However, the GDP witnessed a marginal growth in Q3 2018 to 1.8 percent. Though the Q4 results are not yet out from the Nigerian Bureau of Statistics (NBS), there are indications Nigeria might witnessed mild growth as it is usual during harvest periods. Perhaps, the huge elections spending already happening in the fourth quarter might also impact on the GDP as more money circulates and small businesses witness improved patronage. But that is also at risk of the impact on inflation. Inflation currently stands 11.28 percent.
Also critical is the 2018 budget implementation which is based on the Economic Recovery and Growth Plan (ERGP) 2017-2020. Experts say the budget implementation must be reasonable to engender growth in the economy.
The aggregate releases under the 2017 Capital Budget up to June 2018 amounted to N1.58 trillion. But so far in the 2018 capital budget, government has released N995bn as at 21st December 2018. The Capital Expenditure of N2.428 trillion (excluding the capital component of statutory transfers). But government has said it intends to improve budgetary performance with more revenue performance especially through taxes.
On taxes for example, government says it has recorded an increase in the number of registered tax payers from 10 million in 2015 to about 19 million in 2018 under the Joint Tax Board (JTB). Also, the Federal Inland Revenue Service (FIRS) said as at October 31st, it recorded a collection of N4.3 trillion in taxes.
However, the Minister of Finance, Mrs. Zainab S. Ahmed, said government is exploring ways to increase luxury and excise taxes but reduce taxes in certain sectors like MSMES. “So if you have a jet, yacht etc, we will be charging for that. Also for excise duties, there are some new areas that will be introduced. One of the new areas will be carbonated drinks that are produced in Nigeria. We haven’t gotten the approvals yet. But we will do everything possible for high network individuals to pay the right amount of taxes. We will also implement the special luxury taxes that were already approved by not implemented,” she had declared at a recent press briefing.
The finance minister said the ministry implemented several initiatives targeted at recovery, including, the Whistleblower unit that recovered over N8.5 billion and $465 million among others from the 1,051 investigations conducted from tip offs received. There is also the efficiency unit that has been charged with reviewing Federal Government’s overhead expenditures and Voluntary Assets and Income Declaration Scheme (VAIDS) under which over N35 billion was recovered. Also, the asset tracing team discovered assets that were not reported in the Books of Accounts of the Federation.
Budget support to states
Beyond the Paris Club refund to states, the Federal Government supported the states with budget support facility. The government provided budget support to states with a release of N1.9 trillion to enable them meet their salary and pension obligations, especially in the face of dwindling oil revenues over the last two years. According to the Ministry of Finance, the support came in the form of budget support facility, totaling N606.55 billion, which was extended to the states as of May 2018 with strong incentives for reforms in budgeting, IGR, debt management, overheads, etc.
Pensioners smiled in 2018
The Ministry of Finance, recently made the following payments among others:
Through the Pension Commission (PenCom), it paid the sum of N54 billion to settle outstanding pension arrears from 2014, 2015 and 2016, as well as payment of pension claims up to March 2017. Based on verification outcome by the Presidential Initiative on Continuous Audit (PICA), the ministry also paid over 2,000 former workers of our defunct national carrier – Nigeria Airways Limited over N22bn. The government is also making monthly payments of 9,215 former workers of NITEL/Mtel after over 12 years via the Pension Transitional Arrangement Directorate (PTAD). It also paid over N571m as gratuity and arrears to 174 Biafra War Affected Retired Police Officers (WARPRO) in October 2017.
Support to agric sector
The Federal Government has invested in some agricultural initiatives including the Green Alternative, the Anchor Borrowers Programme anchored by the Central Bank of Nigeria (CBN) and in a bid to provide the much needed agricultural inputs, the Presidential Fertilizer Initiative (PFI) has revitalized 16 blending plants with a combined installed capacity of over 2.63 million metric tons of NPK fertilizers.
Excess Crude Account
The ECA lost significant value. Tongues indeed wagged but the finance minister has this explanation: “As at January 2018, the ECA stood at $2.45bn. There are a number of inflows in the year which brought the account to $3.5bn as at October 2018. We had approval from the National Economic Council (NEC) to use $1bn for security. We have paid for the Super Tucano and we have also paid for some critical military equipment which means that most of the $1bn has been utilized to date. We have got instructions from Mr. President with support of NEC to pay part of the Paris Club refund to the states, those also have been paid from that account. So today, we have a balance of $631.5m in the ECA account.” One thing is certain, the public is following the ECA numbers.
A number if bonds were issued to raise government finances. Based on approvals from the executive and legislature, the ministry raised $3bn in Eurobonds which they have used to repay some domestic debts. In total, the ministry said it refunded N900bn into the market that is available for lending to the private sector. It also supported the foreign reserve which has brought down interest rates and stabilized the naira. Government also had previously raised N100b in Sukuk to fund road projects. In December 2018, it raised over N100bn through Sukuk again to still fund roads.
Adeosun resigns, Zainab Ahmed assumes office
One notable event that happened in the fiscal space was the resignation of the immediate past minister of finance, Mrs. Kemi Adeosun, over alleged forged NYSC discharge certificate. On September 14th, 2018, the erstwhile minister’s resignation letter was accepted by President Buhari who immediately asked Mrs. Ahmed, the minister of State, Budget and National Planning to immediately act as minister of finance. She was later appointed the substantive minister.
Key events that may define the fiscal space in 2019
The Federal Government, through the Ministry of Finance might launch the Project Lighthouse, a project that seeks to use big data analytics to provide intelligence to the tax authority on eligible tax payers and their real taxable incomes and assets. This will drag more high networth individuals to pay taxes on assets they had previously evaded taxes on.
The rick to pay more taxes
Also on taxation, Nigerians who enjoy luxury goods and services will probably have to pay more as government plans a fullscale implementing of the policy on luxury taxation. Also, carbonated drinks might be imported into Nigeria only after paying higher excise duties to protect local manufacturers. Government also intends to widen the tax base with more Nigerians paying taxes but hopes to reduce taxes for MSMEs.
The Ministry of Finance will also be extending the IPPIS to all MDAs to optimize Government Integrated Financial Management Information System (GIFMIS).
The efficiency unit of the ministry might be doing a bit of more work in driving down FG overheads. Mrs. Ahmed recently said the efficiency unit will continue to work with government to reduce leakages especially in recurrent expenditure. The unit has set standards for costs that are routine in nature. For instance, if in conferences, there are standard rates that MDAs must use for tea break or lunch; there are standard rate for air tickets.
Introducing standard rate for insurance cover to negotiate in bulk to save money is also underway. We are also in the process in standardizing the type of vehicles that government MDAs will buy to reduce maintenance cost. Computers and photo copies to be bought will also be standardised. With these doe, the Bureau of Public Enterprises will have fixed process that all will adhere to regardless of the vendor, the minister had said.